After the marriage, Henry remained a loyal supporter in the warfare between King Lothair and the Hohenstaufen brothers, Duke Frederick II (who was Henry's brother-in-law, having been married with his sister Judith) and Conrad, then Duke in Franconia and proclaimed the German anti-king. While engaged in this struggle, Henry was also occupied in suppressing a rising in Bavaria, led by Count Frederick of Bogen, during which both duke and count sought to establish their own candidates as Bishop of Regensburg. After a war of devastation, Count Frederick submitted in 1133, and two years later the Hohenstaufen brothers made their peace with Emperor Lothair.

In 1136, Henry accompanied his father-in-law to Italy, and taking command of a Bavarian division of the Imperial army marched into the south Italian Kingdom of Sicily up to Bari, devastating the land as he went. Having distinguished himself by his military abilities during this campaign, Henry was appointed as margrave of Tuscany, succeeding Engelbert III of Sponheim, and as Lothair's successor in the Duchy of Saxony. He was also given the private properties of late Margravine Matilda of Tuscany from the hands of Pope Innocent II.

When Emperor Lothair died on his way back from Italy in December 1137, Henry's wealth and position made him a formidable candidate for the German crown. According to the contemporary chronicler Otto of Freising, after his appointment as Duke of Saxony he boasted of a realm stretching "from sea to sea, from Denmark to Sicily".[2] However, the same qualities which earned him the cognomen of "the Proud" aroused the jealousy of the princes and so ultimately prevented his election. The new king, Conrad III, demanded the Imperial Regalia which Henry had received from Lothair, and the duke in return asked for his investiture with the Saxon duchy. But Conrad, who feared his power, refused to assent to this on the pretext that it was unlawful for two duchies to be in one hand. Attempts at a settlement failed, and when in July 1138 Henry refused to take the oath of allegiance, he was banned and deprived of both his duchies. Bavaria was given to the Babenberg margrave Leopold IV of Austria, a half-brother of the new king Conrad. Saxony, which he had attempted to hold but was not officially invested with, was given to the Ascanian count Albert the Bear, son of Eilika of Saxony, a younger daughter of the last Billung duke Magnus.